Foreign Exchange Option Pricing

This book covers foreign exchange options from the perspective of the finance practitioner. It contains everything a quant or trader working in a bank or hedge fund needs to know about the mathematics of foreign exchange—not just the theoretical mathematics covered in other books, but also comprehensive coverage of implementation, pricing, and calibration. With content developed with input from traders and examples using real-world data, this book introduces many of the more commonly requested products from FX options trading desks, along with the models that capture the risk characteristics necessary to price these products accurately. Crucially, this book describes the numerical methods required for calibration of these models—an area often neglected in the literature, which is nevertheless of paramount importance in practice. A thorough treatment is given in one unified approach.